Nestlé ice-cream deal with Fonterra gets regulatory approval

Posted by Daniel Palmer on 26th June 2009

Nestlé Australia has received approval from the Australian Competition and Consumer Commission for their proposed acquisition of a selection of Fonterra’s ice-cream interests in Australia.

The ACCC found that the proposed acquisition of the Peters brand in Western Australia and Connoisseur brand Australia-wide was “unlikely to substantially lessen competition in the relevant markets”.

“In reaching its conclusion the ACCC noted that the merged entity would not have the ability and incentive to impose a unilateral price rise above competitive levels as it would be constrained by existing effective competitor, and possible sponsorship of new entry by supermarkets,” the competition regulator advised.

“… Barriers to entry into the route trade (are) relatively high due to the domination of freezer space in route stores by a limited number of existing manufacturers. However, the proposed acquisition is unlikely to significantly affect this situation as it more closely resembles a transfer of Fonterra’s strong position to Nestle, which is not currently a significant owner of freezers in Western Australia.”

Nestlé will integrate the production of the Peters (which it owns the rights to in all other states and territories) and Connoisseur brands into its national ice cream business from June 29, with all manufacturing consolidated in its Mulgrave facility in Victoria.

The acquisition was announced at the end of April, with Fonterra selling the remainder of their ice-cream interests in Australia to Bulla. This will include the licence to manufacture and market the Cadbury ice cream range in Australia, as well as the Brownes tub ice cream and Authentic Ice Cream brands.

The ACCC is due to announce their opinion on the competitive impact of the Bulla proposal on July 8.